You’ve filed a SR&ED claim that was selected for an audit and you’ve met with the technical and financial representatives from the CRA to review the claim in detail. The discussion seemed to go well, although the CRA didn’t indicate in the meeting whether or not the claim would be approved. Now, you’ve received a SR&ED review report from the CRA and they are proposing to significantly reduce your claim. What do you do next?
The letter from the CRA is a proposal; nothing has been finalized yet and you have time to respond to their proposed adjustments with additional information. Normally claimants will have 30 days to respond to the CRA.
Here are the next steps if you do not agree with the CRA’s assessment of the claim in the SR&ED technical review report:
Review the technical review report in detail and make sure that the interpretations are accurate. It is possible that the CRA has misinterpreted the facts presented during the onsite meeting with the CRA and claimant.
- Prepare a written response that restates the facts to clarify any misinterpretations.
- Ensure that the response to any misinterpretations stays focussed on the technical challenges.
- Provide additional detail on the actual work that was done to resolve these technical challenges.
- Include specific detail on the various iterations and provide supporting evidence wherever possible.
Bonus: click here to download this 20-page SR&ED Guide to learn everything you need to know to prepare a successful claim.
When responding to the CRA, do not simply state that you do not agree with the assessment. It is important to provide further clarification on the technical challenges and submit new documentation to support the clarification in order to change the CRA’s opinion.
After submitting the written response to the CRA, call them and request a meeting to review and discuss the additional information. The CRA allows you the opportunity to present new information. During the meeting, engage the CRA technical reviewer in a discussion and try to get a sense of whether they are comfortable with the work presented as it pertains to eligibility. Always stay focussed on the technical challenges of the work.
Once you have discussed the additional information with the CRA to clarify any missing or misinterpreted work, the CRA will make a final determination. Hopefully the presentation of new information and additional clarification will change the opinion of the CRA. A final SR&ED review report will be issued which will take into account the additional information.
If you prepared the initial claim in house and have gone through the initial review process with the CRA, but still received a proposal that you do not agree with, consider getting help from an experienced SR&ED consultant.